Foreign Relations of the United States Diplomatic Papers, 1937, The British Commonwealth, Europe, Near East and Africa, Volume II

611.60F31/258

Memorandum by Mr. William P. Cochran of the Division of Trade Agreements

[Washington,] August 12, 1937.

Conversation:	Mr. Kabeláč, Secretary of the Czechoslovak Legation.
	Mr. Culbertson, European Division.
	Mr. Cochran, Division of Trade Agreements.

Six questions were discussed, as follows:

1. Mr. Culbertson carefully reviewed the proposed draft general provisions, with Mr. Kabeláč, article by article, explaining the general objectives of each clause. He emphasized the importance of the articles on quantitative restrictions, exchange control, monopolies, et cetera. After asking several questions, Mr. Kabeláč declared himself satisfied (a) that he understood the reasons for the various clauses, and (b) that he would be able to explain our general position to the Foreign Office in Prague.

2. Mr. Culbertson then discussed the question of Danubian preferences, commenting especially on the fact that recognition of such preferences by us would constitute a definite exception to our general and well-established policy of unrestricted and unconditional mostfavored-nation treatment. He repeated that we hoped preference was a temporary situation, and stated that our recognition thereof held no permanent policy connotations. Following the outline of the attached memorandum, he then elaborated a little on the various portions thereof to be sure that Mr. Kabeláč understood our approach to the problem. A copy of the memorandum was given to Mr. Kabeláč, with the definite understanding that it was wholly informal and that it involved no commitment, as our policy has not yet been decided.

3. Mr. Kabeláč was then presented with a copy of the list of articles¹⁹ which it is hoped to publish at the time of the public notice of intention to negotiate a trade agreement with Czechoslovakia. Mr. Kabeláč is to take this list to Prague and telegraph to his Legation in Washington his Government’s reaction.²⁰ If there is no objection to the list on the part of Czechoslovakia, public notice will be issued as soon as possible.

Mr. Culbertson called attention to the fact that beer is included in the list. He voiced his fear that its inclusion might be misinterpreted by the brewing interests in Czechoslovakia, and asked Mr. Kabeláč to make it very plain in Prague that such publication did not mean that a concession would necessarily be granted. Mr. Culbertson explained that the Secretary had tentatively approved its inclusion, but that the whole list was subject to change if necessary; assuring Mr. Kabeláč, however, that any changes in the list itself would be telegraphed to Prague for discussion with the Government of Czechoslovakia prior to publication.

Mr. Culbertson also remarked that the wording of the first page, in particular, was still subject to change, but that any such changes would not affect the substance of the paragraph.

It was pointed out that the wording of the list itself is that approved, and considered necessary, by our Treasury Department experts.

4. Referring to Mr. Kabeláč’s previously expressed desire for some indication regarding the nature of our requests or Schedule I articles (a list of which has already been furnished the Czechoslovak Legation), Mr. Culbertson said that we planned to present our commodity studies and digests to the Trade Agreements Committee for approval in the near future; and to ask authorization to present to the Czechs a tentative list of our requests on the various products in question, such list to be subject to revision as a result of hearings before the Committee for Reciprocity Information. He added that we hoped to be able to send this list to Prague, through our Legation, for submission to Dr. Stangler during Mr. Kabeláč’s stay in Prague.

5. Mr. Kabeláč then asked what dates had been set for hearings. It was explained that no dates could be set until the date of the public notice was known; but that we hoped to issue the announcement of intention to negotiate during the week of Mr. Kabeláč’s arrival in Prague (August 23–28), and that if this were done oral hearings would be held sometime in October. Mr. Kabeláč asked when the Czechoslovak delegation should arrive, and Mr. Culbertson said that while he believed Mr. Kabeláč would be back in time to discuss that detail, he thought they should plan to come some time in October.

6. Mr. Kabeláč said that it appeared that the Czechoslovak delegation might be rather large, mentioning four members (including representatives of the Ministry of Commerce and the National Bank) and asked our opinion on the subject. Mr. Culbertson said that the size of the delegation was of course a matter for Czechoslovakia to decide, adding that he and Mr. Cochran would attend all of the meetings during the negotiations, being assisted from time to time as necessary by experts from the Tariff Commission, the Treasury Department, et cetera, and that Mr. Hawkins would also take part in the negotiations as far as his time permitted.

[Annex]

Memorandum by Mr. William P. Cochran, of the Division of Trade Agreements

[Washington,] August 12, 1937.

Subject: Danubian Preferences

1. The entire commercial policy of the Government of the United States is based on the principle of unrestricted and unconditional most-favored-nation treatment. Its acceptance of any derogations of this principle which may appear justifiable on economic grounds, must be considered as a temporary policy without permanent implications.

2. The Department’s general position is still as outlined in its aide-mémoire of November 27, 1935.

3. The Committee on Regional Preferences has not yet rendered its detailed report. Consequently, it is not possible for us to take any definite position at this time.

4. It is, however, tentatively suggested that discussions of Danubian preferences, within the limits of the general principles set forth in the aide-mémoire, might begin on the basis of four lists of products, as follows;

(a) Commodities of which the United States is a predominant supplier, on which the United States would desire to accede to no preference.

(b) Commodities supplied primarily by the Danubian countries and of little interest to us, on which we would expect no commitment relative to preference, leaving Czechoslovakia a free hand. It might be better to do this by omission, or by indirection through List (d).

(c) Commodities supplied in appreciable proportion by both the United States and the Danubian countries, on which preference, if granted, would have to be specified and limited.

(d) On all other commodities, we should like to be consulted before preference is granted. (It is not our intention to object to such action except where our interests are involved.)

5. As regards List (c), in particular, preferences would have to be specific and limited; that is, granted only on certain specified products, to certain designated countries, by clearly defined measures.

6. It would seem, therefore, that Czechoslovakia might prepare the following:

(a) List of countries to whom it is planned to grant preferential treatment.

(b) List of products on which she expects to grant preferences to the Danubian countries. (“Preference” means any variation from unconditional most-favored-nation treatment.)

(c) Indicate the type or method of preference under consideration. It is understood that Czechoslovakia grants preference, not by means of special tariff duties, but through the preferential allocation of import quotas. If this is the system of preference to be used in the future, List B above would include those products on which Czechoslovakia may desire not to grant us “fair and equitable treatment.” (“Fair and equitable treatment” with regard to import quotas has been defined as a proportion of the total quota equivalent to the share enjoyed during a previous representative period.)

(d) Indicate the amount of preference it is desired to concede to the Danubian countries.

[For text of public announcement of intention to negotiate a trade agreement with Czechoslovakia, issued by the Department of State on August 31, 1937, see Department of State, Press Releases, September 4, 1937, page 195. For text of supplementary announcement, issued September 9, 1937, see ibid., September 11, 1937, page 224.]

19. Department of State, Press Releases, September 4, 1937, p. 197.
20. The Czechoslovak Legation informed the Department on August 25 that the Czechoslovak Government agreed to the public announcement of intention to negotiate and to the publication of the list.